We talked about why this keeps happening to professional athletes and what can be done about it.
Why aren’t sports industries educating their players on how to take care of their money once they sign these big contracts? Would that solve the problem?
It is not the business or mission of professional sports leagues or teams to help professional athletes manage their finances, or even educate them on how to do it. It is certainly a nice gesture if and when they do it, but it is certainly not a requirement. That may sound harsh, but it is the truth. Yet, to their credit, some of the leagues and teams have taken small steps to introduce their athletes to the realities of financial mismanagement.
Can the leagues do more to educate players? Of course, they can and arguably should do more. Ultimately, however, it is the individual player’s responsibility to educate themselves. The respective league players associations are best situated to negotiate, coordinate and organize the training and education. The player’s associations were formed to represent the interest of the players and therefore their interests are, or should be, aligned. They negotiate collective bargaining agreements, including important provisions for salaries, medical, retirement and other benefits. Why not negotiate for enhanced education and training benefits relating to financial planning and money management. Even then, education alone will not solve the problem. However, it is a vital first step, in my opinion. Education is the foundation, but it must be followed with personal responsibility, action and accountability.
78% of professional athletes are bankrupt within FOUR YEARS of retirement? Here we think that once they sign they are set for life. Why is this happening? Are they spending too much? Is it all fraud? Do they think they’ll play forever?
Fraud is often just one of many factors that can be cited as reasons professional athletes experience bankruptcy and financial distress after or even during their careers. To be clear, not every athlete that experiences financial distress is the victim of fraud. There are other factors that sometimes contribute to financial ruin, including but not necessarily limited to, legal problems, medical needs, poor (or no) financial planning, failed investments, and unreasonable financial support to family and friends. Domestic issues are also an issue that can have adverse financial consequences. Interestingly, the divorce rate for professional athletes is estimated to be between 60-80%, which often leads to unfavorable divorce settlements, alimony and childcare payments. All of these factors can create financial challenges for anyone, not just for professional athletes. The difference is that professional athletes earn as much as 80% of their lifetime earnings before age 35, which makes it much more challenging to bounce back after experiencing a significant financial setback.
Ryan Howard’s story is so sad, especially since he was so close with his family. Sometimes, how do you know that the people you are trusting and have been there in your life and going to screw you over the way that his family did. That’s not a bad investment, right? That’s a family that got greedy.
Ryan Howard’s attempt to empower his family was not necessarily a bad investment. It was, however, poor planning and failed execution. At the end of the day, when everyone else fails us, we would like to believe that we can always depend on our families. Therefore, it would be hard to fault Ryan for trying to empower the same family that nurtured, supported and helped him become the gifted and wealthy athlete he became. Unfortunately, the evidence is overwhelming that mixing family and business affairs presents unique challenges. Greed and envy can have toxic and debilitating effects that can drive a wedge between even the closest of families. For that reason, I would suggest that professional athletes not engage family members to manage their financial affairs. If family members are employed, they should have the skill and experience necessary to fill the role for which they are being engaged. Even then, athletes should never place complete control of their finances under the control of one single. In all cases, I urge athletes to engage an independent third party to execute a robust oversight function.
What are the typical schemes that professional athletes fall for?
Perpetrators of financial misconduct employ a variety of tactics to execute their fraudulent schemes. Sadly, at the heart of fraud is often a betrayal of trust and confidence by the very individuals entrusted to render sound financial advice, including agents, financial advisors, attorneys, business partners, teammates, and even friends and family. Sometimes fraudulent schemes succeed for seemingly simple reasons, while other times the perpetrators will employ much more complex tactics and schemes. For example, athletes are sometimes persuaded to sign loan or investment documents when they do not fully understand the contents. In other instances, perpetrators forge signatures or manipulate documents to give the appearance of approval. Yet, most forms of financial fraud will usually fall into one of six categories, each of which are explained in FLAG: (i) unauthorized investments, (ii) unsuitable investments, (iii) misrepresentation, (iv) misappropriation, (v) Ponzi schemes, and (vi) pump and dump schemes.
What did you learn from Plaxico’s experience that made you want to write this book? If his story didn’t encourage you to do it, why did you write this book?
Professional athletes work for years and make considerable sacrifices along their journey to make it to the professional ranks. Plaxico Burress was no different. He was athletically gifted, worked extremely hard and made tremendous sacrifices to earn the opportunity to play in the NFL. Like other professional athletes, he spent years mastering his craft, not his financial or investment prowess. So, when he signed his first contract and received his first bonus, he instantly became a target of financial predators and lost considerable sums of money to fraudulent schemes. Plaxico urged me to write FLAG because he wanted to help other professional athletes avoid the real-life challenges that he had to endure. Together, we wanted to shine a light on the harsh realities that professional athletes experience outside of the perceived glitz and glamour.
Many people will say, “Well, I’ll never make as much as that pro athlete made, so why should I care about these tips?” Why should they?
It is true that professional athletes are particularly susceptible to fraud because they have access to significant amounts of capital, and are often perceived to lack the experience and expertise necessary to manage it. Yet, the Financial Industry Regulatory Authority (also known as FINRA) has opined that as many as 84% of Americans have been solicited with a potentially fraudulent scheme. Therefore, while professional athletes grab the lion’s share of headlines, the lessons learned and principles shared in FLAG are applicable to all investors.
I’m thinking of the kids in college sports who dream of signing big bonuses in pro sports. Should something be done on a college level to teach kids what they can expect once they hit the pro circuit?
According to the NCAA, there are more than 480,000 student-athletes, of which approximately 2% – or 15,600 – will advance their careers to the professional ranks and be drafted by either the NFL, NBA, WNBA, MLB, NHL or MLS. Certainly, there are many other student-athletes that will become professionals in golf, swimming, track & field and a host of other professional endeavors in and out of the sports arena, wherein they will earn a comfortable living. Given this reality, it makes sense that colleges and universities prepare and educate their student-athletes, even if on an elective basis.
Thank you Antony!
- John Hennigan Talks Film & Thumb Wrestling! - October 16, 2017
- Primetime Emmy Awards Predictions - September 16, 2017
- How Pro Athletes Become the Victims of Fraud - August 29, 2017
- Julie Stewart-Binks Talks About the Future of Soccer - August 20, 2017
- A Season With Navy Football Documentary on SHOWTIME - August 16, 2017
- List of Best College Sports Programs Released - August 12, 2017
- Modern Gladiatorial League Combines Game of Thrones and MMA - August 11, 2017
- National Hot Rod’s Jim Oberhofer Talks Racing, Life - August 11, 2017
- After Concussions and Stroke Does Darryl Clack Regret His Career? - August 4, 2017
- 5 Netflix Sports Movies to Watch in July - July 12, 2017